Pension Option

DEFINITION of 'Pension Option'

A set of options that a pensioner has in regard to the handling of his or her pension. Pensioners must make choices that determine how the funds will be distributed, and they must weigh the advantages and disadvantages of each option to determine which will work best for their financial and family situation.

BREAKING DOWN 'Pension Option'

Some of the pension options from which pensioners must choose will determine if a spouse will continue to have benefits in the event of the pensioner's death, or if benefits will be paid only during the life of the pensioner.

Options that must be examined include lump-sum distributions, single life and joint and survivor pension payout options. For instance, if a pensioner opts for a single life annuity, he or she can expect larger monthly benefit payments, but a spouse will not be eligible to continue receiving benefits if widowed.